You—not any advisor—are responsible for deciding how much of your assets you spend for various advisory services, based on what you’ll receive in return. Your decisions will have a meaningful impact on your wealth.

Under the status quo, wealth management clients are focused on investment management services, paying hefty fees for a confusing and often unsuccessful set of solutions. But times are changing, with competition and technology leading to more transparency and lower-cost options.

Case in point: Passive investing has caught fire with individuals and institutions alike. Vanguard, best known for its low-cost, passive ETFs and mutual funds, attracted $236 billion from investors in 2015, ending the year with more than $3.3 trillion of assets under management and cementing its place as the world’s second-largest asset manager1.

In all, investors put $361.8 billion into index funds and withdrew $139.5 billion from actively managed stock and bond funds through November 2015.

Meanwhile, technological advances are threatening to overturn Wall Street’s old order. So-called robo-advisors such as Betterment.com and Wealthfront.com are providing well-diversified portfolios of low-cost ETFs tailored to meet investors’ goals. The new breed of “robos” not only define and implement customized portfolios, but they also rebalance and tax-manage them for a fraction of advisors’ traditional fee.

As for transparency, technology is helping investors understand whether they’re getting enough value from their fund managers. Tools such as FeeX.com and PersonalCapital.com allow investors to view their assets, see clearly what they pay, and understand the alternatives.

Those who are serious about preserving and increasing their family’s long-term wealth must break from the “investments-first” mindset. One way to do that is to understand the services an advisor provides, and the relative value of each service.

While there are numerous ways to divide the responsibilities that an advisor has to their client, we segregate them into four primary categories:

If you’re not receiving any or all of the services, then you shouldn’t pay for them. Furthermore, each category should have a maximum fee: After all, many of the services an advisor provides require the same effort for a small account or a large account. Wealth advisory clients should pay only for the value that is truly being delivered.

That’s not the way the industry has traditionally worked, however. Advisors frequently charge a fee starting at approximately 1% or more, regardless of the range of services they deliver. But a very different approach is emerging: unbundled fees, which allow clients to pay for exactly the value they receive. We hope that the unbundled fee structure will ultimately gain ground, forcing advisors to be accountable for the services they do and do not provide.

Disclosures:

The information provided is for educational purposes only and is not intended to be, and should not be construed as investment, legal or tax advice. The information is subject to change and, although based upon information that AdvicePeriod considers reliable, is not guaranteed as to its accuracy or completeness. AdvicePeriod makes no warranties with regard to the information or results obtained by its use and disclaims any liability arising out of your use of, or reliance on, the information.

In accordance with Treasury Regulations Circular 230, any tax discussions contained in this communication was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any tax-related matter addressed herein.

Past performance is no guarantee of future results. There is no guarantee that the views and opinions expressed in this article will come to pass. Investing in the stock market involves gains and losses and may not be suitable for all investors. Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security. In preparing this article, we have relied upon information provided by third parties. While we believe these sources to be reliable, the accuracy and completeness of the information is not guaranteed. We have provided performance results of certain indices for comparison purposes only. A description of each index is available from us upon request. The historical performance results of each index do not reflect the deduction of transaction and custodial charges, nor the deduction of an investment management fee, the incurrence of which would have the effect of decreasing indicated historical performance results. It should not be assumed that your account performance or the volatility of any securities held in your account will correspond directly to any comparative benchmark index.

AdvicePeriod, LLC (“AdvicePeriod”) is an SEC registered investment adviser with its principal place of business in the State of California. Any reference to the terms “registered investment adviser” or “registered,” do not imply that AdvicePeriod or any person associated with AdvicePeriod has achieved a certain level of skill or training. AdvicePeriod and its representatives are in compliance with the current registration and notice filing requirements imposed upon registered investment advisers by those states in which AdvicePeriod maintains clients. AdvicePeriod may only transact business in those states in which it is notice filed, or qualifies for an exemption or exclusion from registration/notice filing requirements. This article is limited to the dissemination of general information pertaining to its investment advisory services. Any subsequent, direct communication by AdvicePeriod with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. For information pertaining to the registration status of AdvicePeriod, please contact AdvicePeriod or refer to the Investment Adviser Public Disclosure web site (www.adviserinfo.sec.gov).

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About AdvicePeriod

AdvicePeriod is an SEC-registered investment advisor dedicated to focusing clients on the important decisions necessary to manage their wealth. By combining actionable planning advice with objective investment guidance, we strive to enable clients to achieve their financial goals and shape their legacy for generations to come. This is how wealth management is going to evolve. This is AdvicePeriod.